IS EQUITY FINANCED BUDGET DEFICIT STABLE IN AN INTEREST FREE ECONOMY?

M. Aynul Hasan and Ahmed Naeem Siddiqui
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M. Aynul Hasan: Department of Economics, Acadia University, Postal: The Johns, Hopkins University, Baltimore,
Ahmed Naeem Siddiqui: Department of Economics, Acadia University, Postal: The Johns, Hopkins University, Baltimore,

Islamic Economic Studies, 1994, vol. 01-2, 1-14

Abstract: The purpose of this paper is to analyze the stability of an equity financed budget deficit in an interest free Islamic economy. To this effect a small closed economy theoretical macroeconomic model broadly consistent with the Islamic tenets is developed. This study found that under a strong wealth effect an equity financed deficit is not necessarily unstable and that government expenditure policies may contribute positively in terms of enhancing the output of the economy.

Date: 1994
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Persistent link: https://EconPapers.repec.org/RePEc:ris:isecst:0122

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